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The Impact of Oligopolies, Through the Eyes of

Beer

By Lachlan Black

In an increasingly competitive market, big Melbourne-based breweries; Carlton,


businesses are the major players within Castlemaine, Victoria, Shamrock, Fosters
different areas of the economy. So much and McCracken. The Society of Melbourne
so to the point that a handful of large Brewers formed in 1903 in an effort to
multi-national corporations take up the salvage the six breweries that made it
majority of a market share and exist whole. Each brewery was on the brink of
comfortably with one another. Such a closure, so merging together saved their
scenario can be called an Oligopoly. The businesses.1
large corporations that make up
oligopolies employ vast amounts of
people, contribute towards the local and
Australian economy, and can provide
infrastructure in areas that which
previously would not have said
infrastructure. However, what cost do
these companies have on local
communities? This argument has been
had before, however this time it shall take
place through the lens of a beloved
beverage: Beer.

Beer production in Australia has a vivid


and deep history. But the companies that
produced the beer changed overtime, as
too did the economic environment and
the demands of consumers. Such a (Figure 1: The Engine Room at the Victoria
Brewery, producing the fan favourite
company is Carlton & United Breweries
Victoria Bitter.)
(CUB), or originally, the Society of
Melbourne Brewers. This particular Carlton & United increased their market
brewer is an amalgamation of six different share after its formation, buying out

1
John Moloney, The Penguin Bicentennial History
of Australia: The Story of 200 Years (New York, The
Viking Press, 1987), 219.
competitors and expanding its business2. minimum, and workers being refused a
This enabled the newly formed pay increase in the form of a rise in
conglomerate to expand its territory over number of hours worked, it is plausible to
Australia and become increasingly say that these local workers were
competitive with other beer makers. impacted by the formation of this
Carlton & United were never a monopoly oligopoly. While this reluctance has an
of the beer production industry, however impact on the workers of Carlton United
this way of operating a company is similar at the time, it is to be noted that Carlton
to that of an Oligopoly. When Oligopolies United did indeed raise its wages for its
exist within a particular market, external employees.4 While the employees of
monitoring agencies can experience Carlton United experienced this pay rise,
difficulty getting said oligopolies to the negative impact of the formation of
comply with worker demands and public this oligopoly could be felt by companies
pressure. and workers external to the
conglomerate.
It is important to look to these examples
in the past of businesses behaving in such
a manner, as it provides a precedence in
which to examine modern case studies
that exist today.
Oligopolies can have the same
characteristics similar to that of a
monopoly, with the two being confused
often.5 Australia currently does not have
anti-trust laws preventing the formation
of monopolies, unlike the United States.
(Figure 2: An newspaper excerpt showing
However, the Australian government
Carlton United Breweries not raising
workers’ wages.) created the Australian Competition and
Consumer Commission in 1995, which
A reluctance to increase wages for monitors businesses and organisations to
workers can have a detrimental impact on ensure that their conduct is lawful and
said workers, as the cost of living at the honours the ethics of the law6. This
time was overly high and wages made a independent watch dog holds
relatively low.3 With wages being at a organisations accountable for their

2
Keith Deutsher, The Breweries of Australia (Port <file:///C:/Users/Administrator/Downloads/Sub15
Melbourne: Lothian Books, 1999), 6.pdf>
3 5
Householder, ‘Cost of Living’, The Argus, 11 Jan.
6
1904, para. 1, < Australian Competition and Consumer
https://www.fwc.gov.au/documents/documents/e Commission, ‘About the ACCC’, Australian
ducation/news/argus_11jan04_cost_of_living_lett Competition and Consumer Commission [website],
er_to_editor.pdf>, accessed 15/10/2019. (2019), para.3, <https://www.accc.gov.au/about-
4
Carlton & United Breweries, Corporate Avoidance us/australian-competition-consumer-
of the Fair Work Act Submission 156 (2017) commission/about-the-accc> accessed 19 Oct.
2019.
business dealings. However, this wages for workers. As a result of these
commission did not exist in the prior to wages and working conditions the
1995. When oligopolies are formed, a side workers went on strike in protest.
effect of such a merger is that the prices Castlemaine Perkins’ operations took
of those products can increase, meaning significant damage, up to 25% drop in
that consumers spend more money on an profits as a result of the protest, since
existing product. Such an act is called their manufacturing process was
price fixing, which enables an organisation interrupted.9
to set its prices within a limited
competitive field with little chance of
sparking a trade war with its fellow
competitors.7

Returning back to the past, while not


directly having an impact on competing
businesses oligopolies can have indirect
effects on communities. In 1925, Carlton
and United Breweries bought out
Fitzgerald’s Brewing and Malting Co,
Castlemaine and closed its doors.8 This
closure resulted in employees losing their
employment and way of supporting not
only themselves but their families as well.
This loss of job would have been
detrimental to the workers of the
Castlemaine community, as the time (Figure 3: Castlemaine XXXX Beer was
period in which this took place was one of widely popular in Australia, but the brewery
significant financial struggle. later faced financial hardship).

As a result, the brewery shifted its It was not Carlton United that directly
operations to Brisbane. Aside from the caused this strike to place and the lower
workers that were affected by the closure wages that caused it, this is true.
of the brewery, the relocation and However, in an indirect manner, the
pressure from Carlton United on formation of Carlton United, and the price
Castlemaine Perkins to remain fixing which took place years after the
competitive pushed the company to turn formation did have some influence over
to cost-cuts. This meant stagnant, low the operations of Castlemaine Perkins.

7 9
Economics Online, ‘Oligopoly’, Economics Online ‘Castlemaine, Perkins Profit Fall’, Sunday Mail,
[website], (2019), para. 1 ‘The Sunday Mail Classified Advertisements’, 25
<https://www.economicsonline.co.uk/Business_ec Dec. 1938, A3, in Trove [online database], accessed
onomics/Oligopoly.html>, accessed 19 Oct. 2019. 19 Oct. 2019.
8
‘Fitzgerald’s Brewery’, The Register, ‘Trade,
Finance, and Mining’, 19 Feb 1925, A2, in Trove
[online database], accessed 19 Oct. 2019.
With Carlton United holding the
predominant market share of the time,
While this price increase existed during
and setting increasingly competitive prices
the time period when the company was
on their products pushed Castlemaine
known as the Society of Melbourne
Perkins to cut costs and edge closer to
Brewers, the price increase certainly
fully shutting down.
would have had an impact on the local
While Carlton & United was not the only community at the time.
beer maker within Australia at the time, it
This pattern of Carlton & United
certainly was the most prominent at the
purchasing competing breweries around
time10. This form of business can begin to
the nation was commonplace, as it was
similar to that of an oligopoly, as the
not only Fitzgerald’s Brewing and Malt
company controls the majority of the
Company that was bought out then shut
market share. Such an affect can mean an
down by Carlton & United. Other
organisation starts to raise prices to
breweries were often bought out by such
become more profitable. By not having
as Hodges Brother Breweries in Geelong
rival organisations to compete with, the
(1925) and the Ballarat Brewing Company
pricing of the products produced by a
(1958)13. As these breweries ceased
company can steadily increase.11 While it
operations, the people who worked in this
is true that Carlton & United did not lay
breweries found themselves without work
off any employees due to the economic
and means of providing for themselves.
climate at the time, it did however push
Not all buyouts of businesses dictate the
the prices of the products within its
end of employment for the workers of the
range.12
business that has been bought out, it is
possible that workers are rehired and kept
on to work for the new parent company.
Yet despite this, when a company is
bought out and the operations are
brought to a close, it is the workers who
are left without jobs. Without work and a
high rate of unemployment, the workers
and their families would have experience
significant hardship.

(Figure 4: The Carlton Brewery in the heart


of Melbourne).

10 12
Keith M. Deutsher, The Breweries of Australia ‘Breweries Pool’, The Australasian, ‘Trade and
(Port Melbourne: Lothian Books, 1999), 130-132. Finance’, 5 Dec. 1903, 39, in Trove [online
11
Federal Trade Commission, ‘Competition database], accessed 19 Oct. 2019.
13
Counts’, Federal Trade Commission, (May. 2015) Keith M. Deutsher, The Breweries of Australia
<https://www.ftc.gov/system/files/attachments/c (Port Melbourne: Lothian Books, 1999), 134.
ompetition-counts/pdf-0116_competition-
counts.pdf>,para. 4, accessed 19 Oct. 2019.
company for income will most likely
struggle.
Many communities these days are
supported by the production of local
breweries. They employ local people and
While Oligopolies are not the same as a
bring money back into the economy. It has
monopoly, they do share some similar
only been within the last decade that the
characteristics with each other. It is these
craft beer industry has begun to expand
characteristics that impact small
and diversify the beer market.14 This
sudden expansion within the liquor
industry was overdue, as the grown and
development of boutique breweries was
stifled by the looming competitiveness of
the oligopolies that existed in the liquor
industry during the 20th century.
(Figure 5: An advertisement showing a
Carlton XXXX Bitter Ale on draught, or “on
While oligopolies are able to keep prices tap”).
consistently high if there is little
competition, if some competition does
present itself an oligopoly is able to communities and people within these
reduce its prices to outmatch the new communities. Companies like Carlton &
competitor. While this would reduce the United may often not directly have sway
overall profits that an oligopoly could over the operations of its competitors, but
receive, it did also mean that an when a company of that size flexes itself
oligopoly’s competitor would feel on competitors, there is often little choice
pressured to follow suit and reduce prices between bowing out of competition or
to remain competitive or keep prices the risk taking a loss. Keeping prices
same and hope that consumers select competitive is a major goal of a business,
their product. This competitiveness can be however if the competition has priced its
fatal for new businesses, which products extraordinarily low, then those
characteristically have little capital to organisations either reduce their prices
absorb a price drop.15 also and face the consequences (as seen
in the riots of the Castlemaine Perkins
brewery in Queensland).
By maintaining an economic environment
that stifles emerging companies and
competition within an industry, those
communities who need the newly formed

14 15
Nick Oscilowski, ‘A Short History of Craft Beer in ‘Start-up companies in Australia’, Angel
Australia’, Vintage Cellars [website], (1 Sept. 2017) Investment Company [website], (2019)
<https://www.vintagecellars.com.au/grapevine/be <https://www.australianinvestmentnetwork.com/
er-and-cider/a-short-history-of-craft-beer-in- start-up-companies-australia>, accessed 19 Oct.
australia>, accessed 19 Oct. 2019. 2019.
Mergers and take overs are very common
within the economy. But when a business
is bought out by another, and the newly
purchased organisation is closed down,
the workers who were reliant on that
business for their income may struggle to
make ends meet. With competing
businesses bought out and shut down, the
amount of new companies forming to
provide competition within a particular
industry lowers. For the brewing industry,
having the market share dominated by a
handful of large organisations creates a
difficult environment for an emerging
brewery to gain a foothold in the market.
Some of the liquor oligopolies have
provided Australians with much beloved
(Figure 6: Australian Soldiers enjoying cans
beers, Victoria Bitter, Carlton Draught.
of Victoria Bitter in Vietnam 1965).
These beers are priced competitively for
the market, but what real cost did these
beers have on the small communities that
make up the backbone of Australia?
Reference List:

Primary Sources:
- ‘Castlemaine, Perkins Profit Fall’, Sunday Mail, ‘The Sunday Mail Classified
Advertisements’, 25 Dec. 1938, A3, in Trove [online database], accessed 19th Oct.
2019.
- ‘Fitzgerald’s Brewery’, The Register, ‘Trade, Finance, and Mining’, 19 Feb. 1925, A2,
in Trove [online database], accessed 19 Oct. 2019.
- Householder, ‘Cost of Living’, The Argus, 11 Jan 1904, para. 1, <
https://www.fwc.gov.au/documents/documents/education/news/argus_11jan04_co
st_of_living_letter_to_editor.pdf>, accessed 19 Oct. 2019.
- Cartlon & United Breweries, Corporate Avoidance of the Fair Work Act Submission
156 (2017), <file:///C:/Users/Administrator/Downloads/Sub156.pdf>, accessed 19 Oct.
2019.
- ‘Breweries Pool’, The Australasian, ‘Trade and Finance’, 5 Dec. 1903, 39, in Trove [online
database], accessed 19 Oct. 2019.
-

Secondary Sources:
- Australian Competition and Consumer Commission, ‘About the ACCC’, Australian
Competition and Consumer Commission [website], 2019,
<https://www.accc.gov.au/about-us/australian-competition-consumer-
commission/about-the-accc>, para. 3, accessed 19 Oct. 2019.
- Economics Online, ‘Oligopoly’, Economics Online [website], (2019),
<https://www.economicsonline.co.uk/Business_economics/Oligopoly.html>, para. 1,
accessed 19 Oct. 2019.
- Deutsher, Keith M., The Breweries of Australia (Port Melbourne: Lothian Books, 1999), 130.
- Deutsher, Keith M., The Breweries of Australia (Port Melbourne: Lothian Books, 1999), 132-
134.
- Federal Trade Commission, ‘Competition Counts’, Federal Trade Commission, (May. 2015),
<https://www.ftc.gov/system/files/attachments/competition-counts/pdf-
0116_competition-counts.pdf>, para. 4, accessed 19 Oct. 2019.
- Moloney, John, The Penguin Bicentennial History of Australia: The Story of 200 Years
(New York, The Viking Press, 1987), 219.
- Oscilowski, Nick, ‘A Short History of Craft Beer in Australia’, Vintage Cellars
[website], (1 Sep. 2017), < https://www.vintagecellars.com.au/grapevine/beer-and-
cider/a-short-history-of-craft-beer-in-australia>, accessed 19 Oct. 2019.
- ‘Start-up companies in Australia’, Angel Investment Company [website], (2019) <
https://www.australianinvestmentnetwork.com/start-up-companies-australia>, accessed 19
Oct. 2019.
Figure List:
Figure 1:
- Victoria Bitter engine room, 1938, in State Library Victoria [online database],
accessed 20 Oct. 2019.
Figure 2:
- ‘Importation of Malt.’, The Worker, ‘Victorian Breweries’, 5 Mar. 1908, 26, in Trove
[online database], accessed 14 Oct. 2019.
Figure 3:
- Castlemaine XXXX Sparkling Prize Ale label, date unknown, in State Library
Queensland [online database], accessed 20 Oct. 2019.
Figure 4:
- Exterior view of the Carlton Brewery, 1921, in State Library Victoria [online
database], accessed 20 Oct. 2019.
Figure 5:
- Carlton XXXX Bitter Ale Advertisement, 1906, in Trove [online database], accessed 19
Oct. 2019.
Figure 6:
- Shannon, Michael Barry, 1965, Australian War Memorial, in Australian War
Memorial [online database], accessed 21 Oct. 2019.